A representative from the US Treasury, Graham Steele, has suggested that any potential retail central bank digital currency (CBDC) in the United States should prioritize privacy and the ability for anonymous transactions.

Speaking at a payments conference in Texas, Steele, the assistant secretary for financial institutions at the Treasury Department, highlighted the importance of finding a balance between reducing unlawful transactions and protecting customer privacy in the design of a CBDC.

He emphasized the need to explore technologies and approaches that preserve privacy and anonymity for users, such as Privacy Enhancing Technologies.

Steele also discussed the advantages and drawbacks of a potential CBDC, noting that it could create a competitive payment environment and offer a safer alternative to customers during bank runs.

However, he also mentioned that a group led by the Treasury is currently analyzing the potential implications of a CBDC in the US, and no decision has been made yet on whether to pursue it.

In addition, Steele commented on the FedNow rapid payment system, stating that a variety of payment methods promotes choice and competition in payments, leading to the development of new payment services and features.

Not all politicians are in favor of CBDCs. Some, like presidential candidates Ron DeSantis and Robert F. Kennedy Jr., oppose the FedNow system because they believe it could pave the way for a CBDC, which they consider as granting the government excessive authority.

Michelle Bowman, governor of the Federal Reserve Board, expressed skepticism about CBDCs in relation to retail transactions, suggesting that they may only be justified for interbank and wholesale transactions.

FAQs

What is a CBDC?

A CBDC, or central bank digital currency, is a digital currency issued and regulated by a central bank. It is a digital form of fiat money that serves as a legal tender and can be used for transactions.

What is the purpose of a retail CBDC?

A retail CBDC is a digital currency that is directly backed by a central bank and primarily meant for use by the general public. It aims to provide a secure and efficient payment method while reducing the reliance on traditional banking systems.

Why is privacy important in a potential retail CBDC?

Privacy is crucial in a potential retail CBDC to protect customer information and ensure the confidentiality of transactions. It strikes a balance between preventing illicit activities and maintaining user privacy.

What are Privacy Enhancing Technologies?

Privacy Enhancing Technologies (PETs) refer to a variety of techniques and tools that are designed to enhance privacy and anonymity in digital transactions. They include encryption, mix networks, and zero-knowledge proofs.

What is the FedNow system?

The FedNow system is a new instant payment system being developed by the Federal Reserve in the United States. It aims to provide faster and more accessible payment services for individuals and businesses.

Summary

A Treasury official has stressed the importance of privacy and anonymous transactions in a potential retail central bank digital currency (CBDC) in the United States. Graham Steele, from the US Treasury, highlighted the need to find a balance between reducing unlawful transactions and protecting customer privacy. He emphasized the exploration of technologies that preserve privacy and anonymity, such as Privacy Enhancing Technologies. Steele also discussed the benefits and drawbacks of a potential CBDC, including creating a competitive payment environment and providing a safer alternative during bank runs. However, no decision has been made yet on pursuing a CBDC in the US. The official also commented on the FedNow system, stating that a variety of payment methods promotes choice and competition. Some politicians have expressed concerns about CBDCs, believing they could grant excessive authority to the government. Governor Michelle Bowman, from the Federal Reserve Board, has expressed skepticism about CBDCs for retail transactions.